Seller trying to use tactics on me? What do you think?

Real Estate Broker · Raleigh, NC · Member since 2017 · 174 posts · 69 votes

So I placed an offer on a SFR, the listing agent told me through my agent that "The seller has received a second offer on this home and is requesting a 'highest and best' offer from the buyers by 5:00pm tomorrow" . Honestly, I think this is a b.s. tactic where they are trying to engage me into a bidding war (without for sure knowing if there is even "another buyer"(?)"). I'm not emotionally attached and am willing to walk away from this deal at any moment. But I wanted the BP community to share your insights? I know I heard on one of the podcasts (where at an auction- they have a reserve price- and they have their people place bids to get it up to that price so they can encourage other people to bid higher), so I think this applies to the exact same situation. What do you think?

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Charlie MacPherson

China, ME · Member since 2014 · 3k+ posts · 4k+ votes

@Peter K. It could be BS, but it would be unethical. When I represent a seller, I have a fiduciary relationship with him. I'm required by ethics and law to get him the best deal possible - but I cannot lie to do it.

That said, I'm in the process of selling a property in the Boston area for another BP'er. It's in a super hot market.

It's actual value is $400K, so we listed it at $375K in order to generate a bidding war. We held off showings until the one and only open house on Sunday and requested final and best by 6:00 PM on Monday.

The open house was wild, with over 50 people coming through. We had 7 offers.

The high bidder contacted me to ask how they could improve their offer.

We ended up at $434.6K and the buyer (at my suggestion) dropped the home inspection contingency. :-)

So yes, especially in a hot market, final & best is a legit tactic - but there is another option.

Submit your highest & best, even if it's the same number, but include an escalation clause:

"Buyer will increase his offer to exceed any bonafide, good faith offer by $1,000 to a maximum price of $XXX,XXX. The competitive offer must be presented for verification."

That should smoke out any BS. If the agent or seller were to create a fake offer, they would have crossed the line into actual fraud.

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Eric H.
Real Estate Solutions Provider · Baltimore, MD · Member since 2014 · 571 posts · 452 votes
9y
Great morning @Peter K.,
If that was your H&B, walk away. If not, give your H&B and let the chips fall where they may. You should already know what your max offer will be before submitting an initial offer. On houses that are 'hot', an agent asking for H&B is not uncommon.
Happy investing!
Peace!
9 Reply
Filipe Pereira
Property Manager · Windsor Locks, CT · Member since 2016 · 1k+ posts · 1k+ votes
9y
Im closing on a deal soon where I went through the same thing.i still think it was B.S., but I upped my offer a bit (it's still a deal) and got the house under contract. I would be more upset if I didn't up the offer and someone else got the house for only a couple thousand more. Hope that helps @Peter Kim.
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Charlie MacPherson
China, ME · Member since 2014 · 3k+ posts · 4k+ votes
9y
@Peter K. It could be BS, but it would be unethical. When I represent a seller, I have a fiduciary relationship with him. I'm required by ethics and law to get him the best deal possible - but I cannot lie to do it.
That said, I'm in the process of selling a property in the Boston area for another BP'er. It's in a super hot market.
It's actual value is $400K, so we listed it at $375K in order to generate a bidding war. We held off showings until the one and only open house on Sunday and requested final and best by 6:00 PM on Monday.
The open house was wild, with over 50 people coming through. We had 7 offers.
The high bidder contacted me to ask how they could improve their offer.
We ended up at $434.6K and the buyer (at my suggestion) dropped the home inspection contingency. :-)
So yes, especially in a hot market, final & best is a legit tactic - but there is another option.
Submit your highest & best, even if it's the same number, but include an escalation clause:
"Buyer will increase his offer to exceed any bonafide, good faith offer by $1,000 to a maximum price of $XXX,XXX. The competitive offer must be presented for verification."
That should smoke out any BS. If the agent or seller were to create a fake offer, they would have crossed the line into actual fraud.
14 Reply
Corby GoadeBusiness Member
Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
9y
I don't think I have ever made an offer on a property where the exact thing didn't happen. Heck, I've made offers on properties that have been on the MLS for months and months and, coincidentally, the same day I made an offer, there were three others! Such a crazy coincidence! That said, I've slowly learned that there is always another deal around the corner- sounds like you are in the right mind space and not getting emotionally attached. Make aggressive offers based on your buying criteria and stick to that. Some will hit, some will not, but there is always another deal. Whenever I've lost one or walked away, I've found a better deal soon after, which I could not have purchased had I made the original deal. Good luck!
8 Reply
Jason D.
Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes
9y
I just went through this same scenario on a property. listed at $60k, I offered $50k, knowing there would be some back and forth and my max was $55k. Seller came back at $59k so I went to my max at $55k Because I didn't feel like wasting time. They came back at $58k so we walked and continued looking. About a week later they did a "we have multiple offers so highest and best". I resubmitted my $55k offer again, which they accepted a few days later. My advice.... You ran the numbers, you know what you can offer, don't go a penny higher.
8 Reply
Luke Miller
Investor · Front Royal, VA · Member since 2013 · 586 posts · 418 votes
9y
This is pretty standard in Denver right now. You should have a maximum allowable offer and not feel bad about throwing that number out there. I'd have your agent call the sellers agent and see what would make your offer more attractive. Sometimes the most attractive offer isn't the highest price. Maybe they need to close fast or maybe they are looking for a different loan type (not FHA or VA).
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Peter K.
OP
Real Estate Broker · Raleigh, NC · Member since 2017 · 174 posts · 69 votes
9y
@Jason D. I absolutely agree and I'm glad I have a story to relate to someone that went through the exact same situation. The only odd thing here is that I didn't even get a counter and this particular house has been on the MSL for months and months as well so I highly doubt "a second buyer" put in a offer the same day (coincidentally or not) and they're asking for highest and best.
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Peter K.
OP
Real Estate Broker · Raleigh, NC · Member since 2017 · 174 posts · 69 votes
9y
Originally posted by @Corby Goade:

I don't think I have ever made an offer on a property where the exact thing didn't happen. Heck, I've made offers on properties that have been on the MLS for months and months and, coincidentally, the same day I made an offer, there were three others! Such a crazy coincidence! That said, I've slowly learned that there is always another deal around the corner- sounds like you are in the right mind space and not getting emotionally attached. Make aggressive offers based on your buying criteria and stick to that. Some will hit, some will not, but there is always another deal. Whenever I've lost one or walked away, I've found a better deal soon after, which I could not have purchased had I made the original deal. Good luck!
Absolutely.
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Thomas S.
Member since 2016 · 13k+ posts · 12k+ votes
9y
This is all part of the business. You need to develop your own tricks of the trade.
The worst feeling is when you put in a offer and it is accepted without a counter. At that moment you instantly know you over paid.
By the same token you begin the negotiations knowing exactly how much you are willing to pay. A seller should never have any control over the end number. You pay what you want, or less, or you walk.
Only home owners should ever over pay for a property.
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Bill S.Pro Member
Moderator
Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
9y
@Peter K. you can always lower your second offer if you are really sure they are trying to scam you. I know some folks that do that with banks that come back requesting a highest and best similar to the situation mentioned by @Corby Goade. Let us know how things turn out.
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
9y
We don't play games with sellers. With my clients when they are looking at a 3,5,10 million dollar commercial property etc. I have a conversation with the listing broker. I ask if they are trying to squeeze out every basis point with a sale and multiple rounds of bidding? If they are we move on right away.
If they want a credible buyer at a fair price then we submit the offer. Once we are done with a property WE ARE DONE so when you walk away the seller has to know we will not be back under same offer and mean it. Sometimes the listing broker and seller get greedy and take another offer. Months later they come crawling back asking if we are still interested ( Buyer falls out). By then interest rate and market has changed so offer changes unless we are already under agreement on something else.
It's hard enough to get to closing when all parties are committed and reasonable. When they are playing games it is almost impossible to happen.
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Peter K.
OP
Real Estate Broker · Raleigh, NC · Member since 2017 · 174 posts · 69 votes
9y
Originally posted by @Bill S.:
@Peter K. you can always lower your second offer if you are really sure they are trying to scam you. I know some folks that do that with banks that come back requesting a highest and best similar to the situation mentioned by @Corby Goade. Let us know how things turn out.
@Bill S. can you elaborate on how I can lower my second offer if that were to be the case? There is no way for me to know for certain that they are trying to scam me, nor would I be able to prove that.
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
9y
When I look at a property for myself I offer cash and give a short timeline to accept or the deal goes away. More properties come on the market sometimes daily. If everything is getting multiple bids and the herds are being dumb in buying then you might have to go to finding off market properties where you can negotiate and buy how you want.
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Matt K.
Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
9y
this is easy from an investment standpoint... leave the emotions at the door and look at the numbers for what they are: Numbers. You don't "need" this deal, figure out what the max is that makes sense to you from a number stand point and let it ride. As you get better with your numbers you'll be able to fine tune your bids, but don't try to make them work from an emotional stand point just to close a deal.
If you are your max price look at improving the "value" of your offer to the buyer, maybe you can get offer to pay closing, maybe you can have a shorter close, higher down payment, shorter close, etc. This is more difficult to do because the value isn't as black and white.
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Corby GoadeBusiness Member
Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
9y
Originally posted by @Joel Owens:

When I look at a property for myself I offer cash and give a short timeline to accept or the deal goes away. More properties come on the market sometimes daily. If everything is getting multiple bids and the herds are being dumb in buying then you might have to go to finding off market properties where you can negotiate and buy how you want.
Great point, sometimes it's better to submit a new or counter offer with the same price but change the terms or timeline. Turn the tables and put the squeeze on the seller to see where you sit.
0 Reply
Eddie Egelston
Residential Real Estate Broker · Crystal Lake, IL · Member since 2012 · 124 posts · 94 votes
9y
@Peter K.
As others have said, it's pretty typical for multiple offers nowadays. I have seen many times where a property is on the market for a long time and then suddenly gets multiple offers. I always feel suspicious too but I have never caught anyone in a lie.
Just FYI it is also typical for them to not negotiate with you until you submit your highest and best.
The best deal I have ever seen sell on MLS had multiple offers, and it was still a steal after it sold...so there's that.
0 Reply
Chris T.
Investor · Downers Grove, IL · Member since 2015 · 1k+ posts · 955 votes
9y
@Peter K.
Fantastic tips from @Charlie MacPherson
Like everyone mentioned, it's very common. If you're prepared to walk away, you can always ask them to keep your offer as a backup.
I've had a seller coming back to me later asking me if my offer is still good.
It's just business, nothing personal. Don't burn any bridges.
1 Reply
Percy N.
Developer · Philadelphia, PA · Member since 2015 · 2k+ posts · 904 votes
9y
Peter Kim , if it is not a REO, have you looked into an automatic escalation clause where you bid say $500 more than the current offer (not yours), upto a certain limit. BUT you state that upon acceptance of your offer, seller will need to disclose the second best offer. I have used this tactic before and amazing how some scenarios magically change. If you really want, start at a lower price than your previous offer with an escalation to your best offer in increments of $500. The agent may try to push back on this but tell them they are legally supposed to present the offer to the seller and you will make sure the seller knows of your offer. If they are playing games, it will backfire on them, if not, you are still in the running. Good luck!
1 Reply
Lesley Resnick
Real Estate Agent · Jacksonville, FL · Member since 2015 · 1k+ posts · 1k+ votes
9y
I think it is unlikely it is an outright lie. Could the seller have underpriced it to create this situation, sure.
The real question is, "should you buy this house at the selling price?" Is this still a profitable piece of business or not? If not, let it go.
1 Reply
Jake Loviska
Professional · Kalamazoo, MI · Member since 2015 · 10 posts · 4 votes
9y
My father just closed on a house yesterday. They told him the same, "we have two other offers, come back with your highest and best". I told him to resubmit his original offer, which he did. Lo and behold it was accepted. I think it mostly would depend on how hot the market is. San Francisco, Denver, Seattle? Maybe the agent is likely telling the truth. Small town Midwest like the one my father lives in? Agent is likely blowing smoke.
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Aaron NelsonBusiness Member
Real Estate Agent · Seattle, WA · Member since 2016 · 307 posts · 191 votes
9y
Stick to your numbers and let them dictate your offer. As others have mentioned, these situations are fairly common, especially in hot markets. As long as the numbers still work, put in your best offer and know that at the end of the day, you did everything you could.
Keep in mind that it is not You v.s. the Seller or even You v.s. the Market. Real estate investing is You v.s. Your Goals, whether they be early retirement, a cost-effective place to live via house hacking or a way to save for your kid's college.
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Steph C.Pro Member
Real Estate Investor · Bristol County, MA · Member since 2010 · 153 posts · 37 votes
9y
Highest & Best is a big thing here in MA. We often see properties get listed and a day or two later, the listing is updated with the H&B deadline.
Or, what's happening even more lately, the house is listed a bit below market price and noted the initial MLS listing it will say: Open house on Saturday, XX/XX/XX at 2:00pm and Highest & Best due by Monday, XX/XX/XX at 5:00pm. Crazy!
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Tony WooldridgePro Member
Rental Property Investor · Walla Walla, WA · Member since 2016 · 480 posts · 346 votes
9y
@Peter K., looks like BP showed up in their true form as usual! With that said, I have nothing to offer in the way of advice that hasn't already been covered in GR8 detail but the only question I have left for you is how did it turn out?
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Account Closed
Flipper · Pittsburgh, PA · Member since 2017 · 218 posts · 345 votes
9y
"Highest and Best" is common with big sellers in Pittsburgh, especially, we've found, with government-owned houses: Fannie Mae and Freddy Mac properties.
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Greg Downey
Lender · Springfield, MO · Member since 2015 · 379 posts · 180 votes
9y
I would venture the say that this depends on the market. You probably know the answer already. How fast are deals going in YOUR market? Fast? then it might be legit. Slow? then B.S.
I like the idea of "changing" the offer. For example: Our current home was on the market for $119,900. We offered $122,200 but they pay closing. After closing, the selling agent said that coming in higher than asking was what sealed the deal, even though we could have offered asking price but had to come out of pocket for closing. In that scenario, I promise you that the sellers would have waited to see if they could "beat" asking price. The net exchange at closing was the exact same, but the sellers really felt like they had done will with and "over asking price" deal.
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